Parsing the Fed (October 31, 2007 Edition)

The Fed lowered the Fed Funds Rate by 0.250% yesterday to 4.500%. This was expected, and yet, mortgage rates jumped after the announcement as if markets were surprised. Normally, when an economic event (e.g. a Fed meeting) goes as expected, markets remain relatively calm and unchanged. That didn't happen yesterday, though, because of whispers surrounding an article by Wall Street Journal writer Greg Ip. Ip is known for his close connections to the Fed and when he hypothesized that the...